The Leasing Re-emergence: What It Means for CUs Down the Road

With new vehicle inventory rebounding and consumers looking for ways to alleviate monthly payments amid elevated interest rates, leasing is experiencing a resurgence. Although credit unions tend to focus on the used vehicle market, the re-emergence of leasing is a trend worth monitoring, especially as these vehicles come off-lease in the next three years.

According to Experian’s “State of the Automotive Finance Market Report: Q2 2024,” leasing grew to 25.35%, from 21.14% last year and 19.30% in Q2 2022. Importantly, once these vehicles come off-lease, we should see an uptick in late-model used vehicle inventory. More available options could impact pricing, and ultimately influence the financing credit unions offer to their members.

Understanding Overall Market Share Trends

While acknowledging current leasing trends is crucial for future decisions, knowing where the market share currently stands is important for credit unions as they monitor consumer behaviors.

For instance, credit unions continue to have the most market share of used financing at 27.63% in Q2 2024, although it is down from 29.46% last year. Meanwhile, banks slightly grew from 26.21% to 26.83% year-over-year and captives went from 8.39% to 8.45% during the same period.

For new vehicle financing, captives led market share at 60.56% this quarter, from 57.30% last year, while banks dropped from 22.41% to 21.26% and credit unions went from 14.43% to 10.30%.

Captives also led the total finance market share at 30.88% in Q2 2024, from 28.46% last year. Banks followed at 24.41%, from 24.67% in the same time frame and credit unions came in at 20.16%, from 23.29% in Q2 2023.

While it’s a positive sign that credit unions continue to lead the used vehicle market, identifying the changes in consumer preference can help paint a more holistic picture as they look for ways to implement strategies and regain their overall market position.

Finance Market Maintains Stability

Another important factor that credit unions should take into consideration is more consumers are shifting into the super prime space for used vehicle financing. For instance, super prime consumers accounted for 21.25% this quarter, up from 19.15% last year.

Additionally, the total vehicle finance market is continuing to move into the prime-plus space as more consumers maintain or improve their credit scores. In Q2 2024, super prime increased to 31.59%, from 28.98% in Q2 2023, and prime went from 39.84% to 37.82% year-over-year, accounting for nearly 70% of the total vehicle finance market when combined.

Taking a deeper dive into the finance market, average new loan amounts for new vehicles slightly increased from $40,743 in Q2 2023 to $40,927 in Q2 2024 and the average interest rate grew from 6.78% to 6.84% in the same period. However, the average monthly payment for a new vehicle only increased $1, reaching $734 this quarter.

On the used side, the average loan amount declined $1,068 from last year, reaching $26,248 this quarter and the average rate was at 12.01%, from 11.47% in Q2 2023. Though, the average monthly payment declined from $536 to $525 year-over-year.

The automotive finance market remains dynamic and it’s inevitable for consumer behaviors to shift based on where the market stands and who is offering the best option for flexibility and affordability. By analyzing this data, credit unions have the opportunity to stay ahead of the trends and prepare for what’s to come – particularly in the used vehicle space.

Melinda Zabritski is Head of Automotive Financial Insights for Experian.